Quiz 389: Banking Awareness for Banking Examinations

First Published: May 27, 2010 | Last Updated:July 9, 2019

1. From the given options 1 to 4 , please find out the one which is not an objective of a central Bank of a country?

[A] The central Bank of a country aims at profit[B] The central bank is given powers to control and regulate the working of the commercial banks[C] The central bank is given powers to control and regulate the working of the commercial banks[D] Central Bank generally controls the credit

2. From the given options, bring out the one which is not a function / power of Reserve Bank of India:

[A] To assume the responsibility of meeting directly or indirectly all reasonable demands for accommodation[B] To hold cash reserves of the commercial banks and make available financial accommodation to them[C] To enjoy monopoly of the note issue[D] To assume the responsibility of statistical analysis of data related to macro economy of India

Notes:The mentioned function is of Central statistical organization and not of RBI

3. Many a times we read in the newspapers about margin requirements. From the given options, find out the one which correctly indicates margin requirements

[A] Margin requirements aim at the regulation of the volume of credit as well as flow of the credit[B] Margin requirements imply that every bank has to keep certain minimum cash reserves with the reserve bank of India[C] Margin requirements imply that every bank has to keep certain proportion of its total deposits in the form of cash with it self[D] Margin requirements imply to a cushion against the decline in the value of the security

Correct Answer: D [Margin requirements imply to a cushion against the decline in the value of the security]

Notes:Option 1: Quantitative control aim at the regulation of the volume of credit as well as flow of the credit, qualitative control aim at the regulation of flow of the credit.
Option 2 : every bank has to keep certain minimum cash reserves with the reserve bank of India – Cash Reserve Requirements,
3- every bank has to keep certain proportion of its total deposits in the form of cash with it self-Statutory Liquidity ratio,
Option 4 – certain rate at which it discounts the bills of exchange of the commercial bank -Bank Rate .

4. What will be the impact on the cash reserves of commercial banks if RBI conducts a sale of securities ?

6. Many a times we read in the financial newspapers that Reserve bank of India is “Lender of Last Resort (LOLR) ” In India. Which among the following statement gives the most correct definition of “Lender of Last Resort”?

[A] If a person or firm which is eligible to get a loan, does not get it from any commercial bank, may approach to Reserve Bank of India for loan.[B] If the state governments are in crisis and need money for short term , they can approach RBI for this purpose[C] If a commercial bank is in crisis, it may place its reasonable demand for accommodation to Reserve Bank of India[D] A scheduled commercial bank meets all of its demands in all weathers from Reserve bank of India

Correct Answer: C [If a commercial bank is in crisis, it may place its reasonable demand for accommodation to Reserve Bank of India]

7. Many a times we read in the newspapers that RBI takes certain steps to curb the menace of Inflation. In this context, which among the following will not help RBI in controlling the inflation in the country?

[A] An increase in the Bank Rate[B] An increase in the Reserve Ratio Requirements[C] A purchase of securities in the open market[D] Increasing the Repo Rate

[A] The Reserve Bank of India has the special powers to control and regulate the commercial banking system[B] A rise in the bank rate is a strong anti-deflationary monetary tool[C] Minimum Reserve Requirements are fixed to ensure the liquidity and solvency of individual commercial banks[D] Reserve Ratio Requirement is a quicker method than bank rate and OMO (Open Market Operations) in general credit regulations